Top pay in the Public Sector

21 December 2009: In a report published today, the Public Administration Select Committee (PASC) calls for a Top Pay Commission to "name and shame" public sector organisations that pay excessive salaries to their top officials. The Commission would produce principles and benchmarks to be followed by pay setters and would be able to launch investigations where these were breached. PASC believes a Top Pay Commission would ensure greater coherence to the setting of top pay across the public sector.

PASC concludes that massive increases in private sector executive salaries over the last ten years have led to smaller, but still very large, increases at the top of the public sector. This "contagion effect" has meant that the highest salaries in both sectors have increased much faster than average earnings.

PASC also identified a number of weaknesses with current arrangements for setting pay in the public sector. These include variable levels of transparency, tensions between devolved and centralised pay setting systems, a perception that some public servants have been rewarded for failure and a tendency for some parts of the public sector to compete against others for a small number of experienced candidates, rather than growing talent internally.

Some of the Committee’s other key recommendations include

a call for better human resource management across the public sector, to ensure talent is promoted from within and failure is not rewarded;

recommendations that would lead to publication of salaries and bonuses across the public sector more in line with the requirements placed on listed companies; and

a proposal to ensure all public sector executive reward packages are drawn up either by independent bodies or remuneration committees with a majority of independent members.

Chairman of the Committee, Dr Tony Wright MP, said

"Set against the stratospheric pay increases seen at the top of the private sector over the last ten years, the public sector has got excellent value from many of its top people. However, we do not believe that the ever-growing gulf between average earnings and top pay is sustainable or desirable - especially in a time of recession. Our Top Pay Commission would ensure that public sector pay setters would have to justify top pay deals and set them in the context of pay at lower levels and the state of the public finances."